CECL cited top compliance challenge, CU relief still needed

September 11, 2019

Credit unions consistently cite the current expected credit loss (CECL) standard as one of, if not the, biggest compliance challenge they are facing, and the Financial Accounting Standards Board (FASB) should search for any opportunities to provide relief to credit unions, CUNA wrote Wednesday. CUNA’s letter was sent to FASB, who issued CECL, in response to a proposed delay of the standard for credit unions to January 2023.

“We appreciate the Board’s recognition of the challenges entities—of all sizes and complexity—are encountering as they work to implement changes necessary to comply with these standards. Thus, we support the proposed changes to the effective dates, as such changes would be consistent with the Board’s proposed new effective date philosophy,” the letter reads.

“However, it is important FASB be aware that CUNA’s longstanding position has been and continues to be that application of CECL to credit unions is inappropriate…underfunding of allowance accounts has not generally been an issue for credit unions. Further, the typical user of a credit union’s financial statements is not a public investor—such as with large, public banks—but instead is the credit union’s prudential regulator, the NCUA,” it adds.

CUNA also notes that CECL will “hinder lenders’ (including credit unions) ability to uplift low- and moderate-income borrowers in their goal of achieving financial independence,” since the new standard will force lenders to be “must more discerning of borrowers with less than perfect credit.”

“Lastly, we ask FASB to collaborate with the NCUA to assist in the development of compliance resources. Even with the proposed delay, it is critical that credit unions have sufficient guidance well ahead of the effective date,” the letter reads.